THE ROMANIAN MINISTRY OF FINANCE NO LONGER GOES TO WALL STREET The borrowing in dollars has been put on hold

• Drăgoi: We are waiting for the markets to calm down so we can issue the bonds denominated in dollars

• Romania's risk premium rising towards the annual high

Romania will no longer borrow from the international markets using the issue of MTNs (Medium Term Notes) denominated in dollars, because the international context does not allow it.

The Ministry will wait until the international markets will have settled down, before launching the MTN issue denominated in dollars, initially scheduled for the end of November, according to Bogdan Drăgoi, a secretary of state in the Ministry of Public Finance.

This week, the representatives of the Ministry of Public Finance (MFP) have attended meetings with investors from the UK and the United States in order to promote the bonds denominated in dollars. The meetings with the investors had good results, according to the statements made by Bogdan Drăgoi for Bloomberg.

He said: "The series of presentations had good results, as investors expressed a strong interest in Romania, and we are now waiting for the best moment to issue the notes denominated in dollars. We are waiting for the markets to calm down and we will be ready to launch the issue as soon as that happens. We want to diversify the sources of financing through this issue denominated in dollars and we are looking to have regular meetings with investors, following the example of Poland".

"We want to improve the way investors perceive Romania, as the country has conducted significant reforms over the last two years, unlike other countries in the region".

The Ministry of Public Finance has prepared an issue of government bonds denominated in dollars on the US market with a minimum value of 500 million dollars and a maximum level of two billion dollars.

The final amount, the maturity, the coupon as well as any other terms and financial conditions of the issue would be determined at the time of the launch of the issue, depending on market conditions, according to an order by the Ministry of Finance.

Dan Lazăr, secretary of state in the Ministry of Public Finance, said on Wednesday that the unfavorable context of the markets and the downgrade of Italy will affect the MTN notes issue which Romania was preparing.

• Romania's CDS is getting close to making an annual high

Romania's risk premium, expressed by the CDS (Credit Default Swap) quotations, yesterday reached 443 basis points, slightly below this year's peak, recorded in October, of 472 basis points.

Dragoş Cabat, the vice-president of the Romanian Association of Financial Analysts, said that the advance of the CDSs reflects a level of contagion on the emerging markets.

"The current context definitely affects the intention of the Ministry of Public Finance to go out on the international markets, because that is the role of the CDS quotations, the degree of risk you can borrow at", he added.

Unlike Romania, Hungary has seen a far higher level of its CDSs (604 basis points), posting a new high for this year. Hungary's situation is deteriorating as ratings firms "Fitch Ratings" and "Standard & Poor's" have revised their outlook for the country to "negative". Hungary sits on the last rung of the "investment grade" category.

Countries in the region which have achieved better performance than Romania were Poland and Bulgaria, whose CDSs yesterday reached 285 and 395 basis points, respectively. Still the premium risk of Bulgaria and Poland is not very far from this year's high, when the CDS of Bulgaria climbed to 435 basis points, and that of Poland climbed to 314 basis points.

• The Euro reached 4.37 lei, on the interbank market

The Euro depreciated insignificantly yesterday, to 4.3564 lei, from 4.3565 lei, during the previous session, at the exchange rate of the Romanian National Bank (NBR). However, on the interbank market the Euro/leu exchange rate was 4.37 lei/Euro in the morning.

"The trading session began with the euro/leu exchange rate at 4.36-4.37 units, but did not sit too much at that level, because orders to sell the Euro entered the market, as investors who bought lei appeared", market sources said.

Trading volumes at a level of 4.37 units were moderate, nearing the average volume of the last few weeks, according to the quoted sources.

After 14:00, the European currency once again fell to 4.3650 lei.

The Polish zloty had a similar evolution to that of the leu, as it started off very high, but saw its depreciation slow down in the second half of the day, whereas the forint gained about 1% against the Euro.

Mihai Ionescu, the president of the Romanian National Association of Exporters and Importers (ANEIR), claims that any normal exchange rate of the leu against the Euro favors exporters. He said: "We do not plead in favor of exchange rates which aren't sustainable. It is not the figure that is important, but the stability of the exchange rate".

The president of the ANEIR said that over the course of the last year, the exchange rate fluctuated between 4.1-4.3 lei, a level which exporters "like and support."

He said that the current deviations of the exchange rate from that band, caused by the international turbulences, are beneficial for Romania's exports, but "exporter's happiness never comes from the skidding of the exchange rate".

The American dollar has continued to strengthen against the leu. Yesterday, the NBR posted an exchange rate of 3,2348 lei/dollar, up 0.48 bani, compared to the previous session.

On the other hand, the Swiss franc yesterday fell against the leu, to 3.5079 units, down 1.49 compared to the previous session.

• Overnight rates remain above 6%

Short term interest rates yesterday continued to advance compared to the previous session, staying above the 6% level of the policy rate.

In the first half of the day, the NBR posted an average interest for overnight attracted deposits (ROBID) of 7.65% a year, compared to 6.76% in the previous session, and the interest for overnight deposits reached 8.15% a year, compared to 7.26% in the previous session.

Analysts consider that the rise in the interest rate is caused by the fact that banks need liquidity.

Dragoş Cabat, vice-president of the Association of Financial Analysts, said that parent banks can no longer finance their subsidiaries, which are "starved for lei". He added that Greek, Italian, French and Austrian banks are facing problems and because of that they are pushing their local subsidiaries to secure funding locally.

Analyst Călin Rechea shares the same opinion, who mentioned that there is a liquidity crisis on the interbank market, even on the European market.

"The current problem is to reveal the true weaknesses which exist in every country, concerning the degree of indebtedness, the structure of the banking system and the degree of exposure", he said.